For various market infractions of which foreign exchange malpractice is prevalent, four banks have paid N1.93 billion fine in the first six months of the year to the Central Bank of Nigeria (CBN) and its counterparts in the capital market, the Securities Exchange Commission( SEC).
Three of the affected banks are in the Tier-1 cadre while the fourth is Tier-2. The quartet, altogether, committed over 15 infractions, drawing the ire of the regulators in the market. They are still awaiting stiffer penalties including suspension of their forex license when the apex bank completes its investigation of the sector’s activities in the forex market.
One of the banks was fined N692million for foreign exchange transactions carried out by Betting and Gaming Companies and N2million for Non-refund of interest on the debit of non-interest related charges to non-funded accounts.
Another was fined N273million for two market infractions including non-verification of customer identity and delay in filing the related transaction report and foreign exchange documentation lapses in respect of some Customers` accounts.
The Tier-2 bank was sanctioned about N230 million for an alleged contravention of extant foreign exchange regulations from January 2013 to July 2020., while CBN imposed N100million on another Tier-1 bank for flouting its guidelines on diaspora remittances.
Sources at the CBN said these and other infractions bordering on foreign exchange malpractices in the money market prompted last week circular from the apex bank, warning banks and threatening to suspend operating licenses of those found culpable after the ongoing investigations.
The apex bank stated that the banks’ activities in the foreign exchange market have resulted in the poor showing of the local currency against other international ones, especially the dollars.
It is a worry that the naira has weakened against the dollar by 6 per cent since the Central Bank of Nigeria (CBN) announced its suspension of dollar sales to the Bureau de change operators in a bid to support the naira and check malpractices in the forex market
The CBN, in a September 10, 2021 memo from O. A Nnaji, Director, Trade and Exchange Department, said it is incumbent on all Deposit money banks to not only know their customers (KYC requirements) but also know their customers’ businesses (KYCB requirements).
“The CBN wishes to remind all banks that it is their responsibility to not only know their customers (KYC requirements) but also know their customers’ businesses (KYCB requirements).
“Given this responsibility, and in view of recent occurrences in the market, the CBN will like to remind banks to desist from all forms of FX malpractices.
“We wish to reiterate that FX operating licences of any bank or banks that are found culpable with ongoing investigations will be suspended for at least one year,” the director said.
Findings from a cursory check of the banks’ second-quarter financial reports showed CBN and SEC sanctioned a leading bank N2.9million in respect of delayed response to the queries of the SEC on cases with two customers and N2million in respect of CBN’s directive on migration of some accounts to a specified product.
The bank was also sanctioned another N80million being penalty for contravening the CBN’s foreign exchange regulations from Jan 1, 2013 to July 31, 2020 and N0.5million sanctioned by the SEC in respect of contravention of rule for receiving bank.
The details of the sanction by the apex capital market regulating body showed the bank paid N0.5 million in respect of a shareholder’s complaint on dividend as the CBN imposed N2million in respect of Consumer Protection report for the period of Jul 2020- Dec 2020.
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The bank, in addition, was sanctioned a sum of N2.25million in respect of failure to comply with the CBN’s AML/CFT regulations and KYC policies in respect of a customer’s account.
The Tier-2 bank was sanctioned N1million N1 million for administrative infractions during Retirement Savings Account Transferin the 4th Quarter of 2020 as a result of failed validation attempts at the point of upload.
The bank in its audited half year ended June 30, 2021 results in line with the requirements of the International Financial Reporting Standards (IFRS) noted that: “Penalty imposed by CBN following an alleged unfair termination of employment of former employee: The CBN imposed a penalty of N2 million on the Bank following an alleged unfair termination of employment of a former employee, whose employment was terminated for being unable to meet the performance criteria required to confirm his employment in line with policy.”